Shares in European aerospace and defence companies soared to record highs this week, elevating expectations for the continent’s military tech startups.
Britain’s BAE Systems leapt by 9% on Monday, while Germany’s Rheinmetall jumped by 14%. Stocks in Sweden’s Saab, Italy’s Leonardo, and France’s Thales also boomed. By the day’s end, the Stoxx Europe aerospace and defence index had hit an all-time peak.
Military tech firms have also been surging. Kate Leaman, chief market analyst at online broker AvaTrade, said these companies have “huge potential” for growth — particularly those with AI-driven solutions.
“We’re already seeing a shake-up in the defence sector, with AI-focused players like Palantir outperforming more traditional defence giants,” Leaman told TNW. “This suggests that cutting-edge, tech-centric firms could possibly capture a sizeable share of the market.”
European defence tech startups have also grabbed investors’ attention. In 2024, they attracted a record $5bn in VC funding — a 24% increase over the previous year.
The momentum has raised expectations of future public listings.
“Many defence tech startups haven’t gone public yet, but with the market heating up and investor interest growing, there’s a strong possibility we’ll see more IPOs in the near future,” Leaman said.
“That could open the door to fresh investment opportunities and raise the profile of these emerging companies.”
The push for defence tech
The spending spree comes amid mounting concerns about Europe’s military sovereignty.
Leaders across the continent have been shaken by the Russia-Ukraine war and tensions with the Trump administration.
Ukraine’s President, Volodymyr Zelensky, has called for the creation of an “army of Europe”. His French counterpart, Emmanuel Macron, has urged his allies to “wake up” and spend more on defence. European Commission President Ursula von der Leyen wants to trigger an emergency clause exempting military expenditures from the fiscal restraints on EU countries.
A growing share of their budgets is going to military tech — and startups are beginning to cash in.
According to a new report from McKinsey, investment in European defence tech startups increased by over 500% between 2021 and 2024 compared to the previous three years.
The report added, however, that the sector remains about five years behind the US’s in terms of maturity.
A major factor in this gap is the struggle to secure late-stage funding — a common problem for European startups across industries.
Nonetheless, the rise of defence tech is set to continue.
“Military spending is rapidly moving away from traditional hardware toward software, drones, and robotic solutions,” Leaman said. “As a result, defence tech companies specialising in these areas may enjoy increasing demand for their products and services.”
Defence tech is a key theme at this year’s Assembly, the invite-only policy track of TNW Conference. The event takes place on June 19 and 20 — a week before the NATO Summit arrives in Amsterdam.
Tickets for TNW Conference are now on sale. Use the code TNWXMEDIA2025 for an exclusive subscriber discount.
